Currency Update – Friday 1st August

Currency Update – Friday 1st August

Its hard to believe its the first day of August already! A sobering thought, making us wounded where has the year gone?

Another sobering thought this morning has been the release of the UK PMI manufacturing data, showing that British manufacturing activity fell at the sharpest rate since December 1998 as the sector feels the impact of the price increases & a fall in new orders. Markets may look upon this data as further evidence that the UK may be heading towards a recession.

The recent negative UK data, has got economists rethinking  their UK  Interest Rate forecasts, to talk of the possibility of rate cuts in 2009. Our economists have  revised their outlook for UK growth in 2008 down from 1.7% to 1.5%. This fall in anticipated growth would give scope for the MPC to look to further rate cuts in 2009 to assist the economy in keeping afloat & as such to avoid a recession, however the possibility of a rescission seems increasingly likely. Sterling is therefore coming under some pressure, having dipping back under 1.98 against the USD.

All eyes will be on the US this afternoon as Non Farm Payroll figures are released, as the recent contrasting data releases from the US does not give the markets any clear indication as to the level these will come in at, consequently when the data is published it could be a busy time in the markets for the USD, depending on the level of the fall in the figures.

Hazel Wilkinson | Treasury Solutions | nabCapital

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